Hospitality is private sector canary in the coalmine

The accelerating rate of collapse of hospitality businesses contains a bigger warning about changes in the workplace as a result of greater government intervention. In short, small business increasingly is being squeezed out by regulation creep and new competition from jobs paid for from the public purse. An anecdotal but common lament is the difficulty experienced by many in finding candidates for entry-level jobs because it is now more attractive for prospective workers to join the Labor government’s favoured care economy and work for the National Disability Insurance Scheme. Young people who once would have taken a service job in hospitality can now make more money and see better prospects supervising NDIS recipients in sometimes more enjoyable tasks. Good for them, but not so good for small business and ultimately the cost of simple pleasures.

Staff shortages and tighter industrial relations laws are only part of the story for why hospitality businesses are failing at nearly twice the rate of a decade ago. As we report on Wednesday, soaring food and energy prices are pushing an increasing number of cafes and restaurants to the brink of collapse. Added to this are higher rents and insurance costs.

Australian Securities & Investments Commission figures show nearly 1600 businesses in the accommodation and food services sector went under during the past financial year. The number of companies failing was 50 per cent higher than in 2018-19 – the last financial year leading into the pandemic – and 90 per cent more than in 2013-14, when the corporate regulator began reporting corporate failures by industry.

Given the cost-of-living squeeze, it is now more difficult for small businesses to pass increased costs on to customers who are also feeling the pinch. In any case, higher costs would only add to inflation, making the situation worse. By way of contrast, the number of public sector workers is increasing at both state and federal levels, and so are wages. This is particularly so in areas such as aged care and childcare, where the federal government has been determined to lift staff ratios and remuneration. There are good reasons female-dominated workplaces deserve special attention. But the overall picture is more people getting higher wages for the same amount of work, which has resulted in productivity in the public sector going backwards as the productive sector has struggled to edge ahead.

The Fair Work Commission has increased the minimum wage by 5.2 per cent, 8.6 per cent and 3.75 per cent, taking it from $20.33 an hour to $24.10 on July 1. Pay rises and tax cuts boosted aged-care workers’ income by $202 a week from July 1 and minimum wage workers by $120 a week.

As business commentator Robert Gottliebsen has written, the number of jobs in Australia has increased by 2.4 per cent across the past year but about 83 per cent of those were in government-aligned industries including healthcare, social assistance, education and training, and public administration and safety. The growth in the public sector has masked deteriorating conditions in the private sector where job advertisements are down sharply, with lower demand for cleaners, tradies and food services workers – all occupations dominated by the private sector.

The threat is about more than the prospect of $10 cappuccinos in stretched boutiques. It reflects a reshaping of the workplace and economy to a more regulated, less efficient system reliant on government. The money has to come from somewhere and at present it is dependent on maintaining our historically high terms of trade driven by the coal, gas and iron ore exports, which many are far too willing to take for granted.